The Board continued its redeliberations on the responses to the Exposure Draft of proposed amendments to IFRS 2 Vesting Conditions and Cancellations.
The Board asked the staff to revise the proposed definition of vesting conditions to clarify the following points:
- vesting conditions are the conditions that determine whether the counterparty is entitled to receive cash, other assets or equity instruments of the entity
- vesting conditions are either service conditions or performance conditions
- a share-based payment vests when the counterparty’s entitlement to it is no longer conditional on future service or performance.
The Board tentatively decided that the proposed definition of performance conditions should be included as a descriptive paragraph rather than as a definition.
The Board tentatively decided to clarify that all non-vesting conditions should be included in the grant date fair value of the equity instrument. Furthermore, if neither the entity nor the counterparty can choose whether a non-vesting condition is met, failure to meet the condition should be ignored, ie there should be no change to the accounting and the expense should continue to be recognised over the vesting period.
The Board concluded that if either the entity or the counterparty can choose whether to meet a non-vesting condition, failure to meet it (eg when an employee ceases to pay contributions to a Save As You Earn plan) should be treated as a cancellation.
The Board tentatively decided that no definition of a cancellation should be included in the revised IFRS. However, the implementation guidance should clarify:
- the treatment of all conditions that determine whether a counterparty becomes entitled to a share-based payment
- the accounting for the liability and equity components of Save As You Earn and similar plans.
As no significant changes to the principles proposed in the Exposure Draft were made, the Board directed the staff to proceed to prepare an amendment with an effective date of 1 January 2008 for approval by ballot.